Bharti Airtel seeks equity conversion for ₹40,000 crore government dues

New Delhi: Bharti Airtel Ltd, India’s second-largest telecom operator, has urged the department of telecommunications (DoT) to convert its adjusted gross revenue (AGR) dues into equity, two people with knowledge of the matter said.

The company owes the government about ₹52,000 crore towards spectrum dues and ₹40,000 crore in terms of adjusted gross revenue (AGR) dues. In the telecom sector, there are certain regulatory payments that an operator has to make to the government for licence, etc., as a percentage of their AGR. Spectrum purchase payment is additional.

The proposal is largely to convert about ₹40,000 crore in AGR dues into equity. At Thursday’s closing share price of ₹1,846 on the National Stock Exchange, this would give the government a nearly 3.5% stake in the company subject to clearance, the first of the two officials said, both of whom spoke on condition of anonymity.

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Queries emailed to Bharti Airtel did not elicit any response till press time.

“Going by the 2021 relief package, Airtel has the option to convert its AGR dues into equity, not the spectrum dues,” the second official said. This is because Airtel has already prepaid spectrum liabilities of ₹66,665 crore and its remaining ₹52,000 crore dues are related to 2021 and 2022 spectrum auction, which is outside the purview of the 2021 relief package, the official added.

The request from Airtel to convert its dues into equity comes after the government recently converted ₹36,950 crore worth of spectrum dues of Vodafone Idea Ltd into equity. With the equity conversion, the government got a 49% stake in the beleaguered telecom company. Earlier, the government had converted ₹16,133 crore of Vodafone Idea interest dues into equity.

Earlier the government had converted ₹16,133 crore of Vodafone Idea interest dues into equity.

The equity conversion in Vodafone Idea happened as part of the telecom relief package of 2021. As part of the relief package, the government gave a moratorium/deferment of up to four years in annual payments of dues arising out of the AGR judgement by the Supreme Court. The moratorium is set to expire this year after which the telecom operators would have to start making yearly payments to the government to clear their liabilities.

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According to the relief package, the telecom operators also had the option to convert the due amount pertaining to the deferred payment by way of equity at the end of the moratorium/deferment period.

If the deal goes through, it will be a win-win situation for both the government and Airtel. This is because Airtel would be relieved of making annual installments pertaining to past dues and save on cash outgo in terms of interest. The government can sell the stake in the market and earn a premium on its investments, given the share price has an upside and the company is doing well financially, analysts said.

However, in a recent interview with Mint, Union minister of communications Jyotiraditya Scindia said the government is not considering any fresh relief to the telecom sector. “The government has stepped in and provided a tremendous amount of relief for the telecom sector and the sector is fiercely competitive but at the same time also extremely remunerative,” Scindia said when asked if the telecom sector would require more relief as a whole.

Last month, Airtel said the prepayments towards spectrum dues have resulted in the company clearing ₹1.16 trillion of scheduled instalments that would have otherwise been payable on their respective dates over the original tenure of the liabilities.

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